THE IMPACT OF HEALTH SHOCKS ON POVERTY LEVEL IN NIGERIA

Abstract

Good health and no poverty are two critical goals of Sustainable Development Goals that any nation would want to achieve.  However, health shock is an unpredictable shock, it implies a welfare loss due to illness or injury while poverty is multidimensional. The poor are more vulnerable to health shock and more households are pushed into poverty due to high out of pocket expenditure on health. Hence, this study examined the influence of health shock on the poverty level in Nigeria for thirty-seven years (1981-2017). Impulse Response and Variance decomposition of the Vector Error Correction Model (VECM) were employed to examine the impact of health shock on the poverty level in Nigeria. The data source for our analysis was from World Development Indicator (WDI) and Central Bank of Nigeria Statistical Bulletin database. Our findings revealed that an increase in out of pocket expenditure and death rate provide an appreciable explanation for shocks to the poverty level. This implies that an increase in out of pocket expenditure and death of household member could make the household more vulnerable to poverty due to reduction in income, savings, investment and productive activities. Our study, therefore, recommends that essential needs of the poor should be addressed to mitigate the adverse effect of health shock to households.